China fixes yuan at four-week low despite pledge

Monday February 29 2016

Counting yuan notes: Chinese growth is becoming less dependent on heavy industry, further hitting demand for raw materials. PHOTO | REUTERS

Counting yuan notes. China's central bank on Monday fixed its central rate for the yuan currency at a four-week low, data showed, despite comments by chief Zhou Xiaochuan that there was no basis for further depreciation. PHOTO | REUTERS 

By AFP
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China's central bank on Monday fixed its central rate for the yuan currency at a four-week low, data showed, despite comments by chief Zhou Xiaochuan that there was no basis for further depreciation.

The People's Bank of China (PBoC) set the yuan at 6.5452 to $1.0, down 0.17 per cent from Friday, according to the China Foreign Exchange Trade System. The fix was the weakest since February 3, previous figures showed.

The weaker currency hurt sentiment on the stock market, with the benchmark Shanghai Composite Index dropping as much as 4.44 percent on Monday morning.

PBoC governor Zhou Xiaochuan on Friday told a seminar on the sidelines of the G20 finance ministers' meeting in Shanghai that the yuan — also known as the renminbi (RMB) would be stable.

"There is no basis for persistent renminbi depreciation from the perspective of fundamentals," he said.

Authorities only allow the yuan to rise or fall two percent on either side of the daily fix, to prevent volatility and maintain control over the currency.

DEVALUATION

But a shock currency devaluation in August, which saw the normally stable unit guided down nearly five percent in a week followed by another drop in January, raised suspicions Beijing is pursuing a currency war to make its exports cheaper.

Central bank chief Zhou denied those accusations on Friday.

In a communique, G20 countries on Saturday pledged to avoid "competitive devaluations", though the document made no direct mention of China.
Zhou and other Chinese officials have repeatedly pledged to move towards a more flexible exchange rate.

US Treasury Secretary Jacob Lew, who is visiting China, on Monday urged the country's premier Li Keqiang to implement economic reforms.
"It is also critical that China continue to move toward a more market-determined exchange rate in an orderly manner," he said in Beijing.

The yuan was quoted at 6.5480 to $1.0 around midday on Monday, weakening slightly from Friday's close of 6.5372.

The central bank said it pumped 230 billion yuan ($35 billion) into the financial system on Monday, bringing total fund injections over the past week to over 1.0 trillion yuan, according to state media.